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TMI Blog2021 (1) TMI 403X X X X Extracts X X X X X X X X Extracts X X X X ..... t the assessee is a Co-operative Bank. The assessee filed its Return of Income for the A.Y. 2009-10 on 17.09.2009 declaring total income of Rs. 24,16,31,680/-. The case was selected for scrutiny. The ld.Assessing Officer after issuing show cause notice and considering the submission/explanation of assessee, made disallowance of premium paid on investment amortized of Rs. 79,05,267/- and disallowance of Rs. 34,75,188/- on account of non-deduction of tax at source for processing charges of MICR to State Bank of India. 3. On appeal before the ld. CIT(A), both the disallowances were upheld. Further, aggrieved the assessee has filed present appeal before this Tribunal. 4. We have heard the submission of the ld. Authorised Representative (AR) of the assessee and the ld. Departmental Representative (DR) for the Revenue. 5. Ground No.1 relates to disallowance of expenditure on premium paid on investment amortized of Rs. 79,05,467/-. The ld.AR of the assessee submits that this ground of appeal is covered in favour of the assessee by the decision of the Tribunal in assessee's own case for A.Y.2010-11 and A.Y.2012-13 in ITA No's.2573/AHD/2014 and 1726/AHD/2016 respectively. In both the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f India from time to time with regard t:o the classification of assets and also the accounting standards for investments, The Board has, therefore, decided that the Assessing Officers should determine on the facts and circumstances of each case as to whether any particular security constitutes stock-in-trade or investment taking into account the guidelines issued by the Reserve Bank of India in this regard from time to time." CBDT has further issued instruction for the assessment of banks vide its Instruction No. 17/2008 dated 26.11.2008 (F. No. 228/3/3008 - ITA- III). Point no. VII of the said instruction- "As per RBI guidelines dated 16th October 2000, the Investment portfolio of the banks is required to be classified under three categories viz. Held to Maturity (HTM), Held for Trading (HFT) and Available for Sale (AFS). Investments classified under HTM category need not be marked to market and are carried at acquisition cost unless these are more than the face value, in which case the premium should be amortized over the period remaining to maturity. In the case of HFT and AFS securities forcing stock in trade of the bank, the depreciation / appreciation is to be aggregated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rk surplus trading funds in securities and although intended to be trading assets may have to keep them for longer periods if funds are not required. The treatment of securities of AFS categories has to be seen in contradiction and contrast with securities of HTM category which are purchased and held for the purpose of Investment only. The circular and instruction of the CBDT being squarely applicable, leaves no doubt on the allowability of the assessee's claim. The ground of appeal is allowed to the extent that the loss is to be taken as business loss.' 6. The Ld. DR relied upon the order of the AO. In furtherance the Ld. DR submitted that when the assessee itself has classified the securities held by it under the head 'investment', the profit/ loss arising on sale of such securities held as investment have been rightly treated to be of capital nature by the AO. 7. The Ld.AR, on the other hand, relied upon the order of the CIT (A). The Ld. AR submitted that the assessee is in peculiar business of banking which is regulated by the RBI. The RBI has prescribed a format whereby the securities held are declared under the head 'investment' and further are c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e (AFS). Investments classified under HTM category need not be marked to market and are carried at acquisition cost unless these are more than the face value, in which case the premium should be amortized over the period remaining to maturity. This was explained by the CBDT vide Instruction No. 17 of 2008 dated 26.11.2008 according which investment of banks clarified under HTM category need not be marked to market and are carried at cost unless these are more than face value, in which case, the premium should be amortized over the period remaining to maturity. The Tribunal in the case of State Bank of Saurashtra Bhavnagar v. DCIT 93 ITD 662 (Ahmedabad), Catholic Syrian Bank Ltd. v. ACIT [2010] 38 SOT 553 (Cochin) held that in view of Instruction dated 26.11.2008, deduction of amortized expenditure on premium on Government Securities is allowable as expenditure. Further, Hon`ble Jurisdictional High Court in the case of CIT-Rajkot-2 v. Rajkot District Co-Operative bank Ltd. [2014] 43 taxmann.com 161 (Gujarat) wherein it was held that in terms of Circular No. 17 dated 26.11.2008, where Co-operative Bank Ltd. purchases certain Government Securities in order to maintain statutory liquid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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